Term life insurance

Term life insurance is for a set time, like 30 years. This time is called the ‘term’ of the policy.

People often get this insurance to help pay off a loan or mortgage, or to provide money for things like raising kids or funeral costs. For example, if you have 20 years left on your mortgage, you can get a term life policy for 20 years.

Decreasing Term Life Cover

The money this policy pays out gets smaller over time. It’s good for when you’re paying off something like a mortgage that decreases over time.

Level Term Life Cover

With this one, your family gets the same amount of money, no matter when they claim it.

Increasing Term Life Cover

This policy’s payout grows over time. It’s useful if you think your family will need more money in the future, like if you have young kids. The payout can go up either with inflation or at a set rate. With a fixed rate, it might increase faster than inflation if you keep it for a long time.

Whole of life insurance

This insurance covers you for your entire life, not just for a certain time. You keep paying into the policy, and when you pass away, the insurance company pays your family, no matter when it happens. It’s great if you want insurance that lasts forever without having to get a new policy when one ends.

Whole of life insurance is often more expensive than term life insurance for the same amount of money it pays out. It also usually includes extra features. For example, you might be able to use the insurance as a loan, which is part of why it costs more.

There are some whole of life policies that are cheaper than others. They cover for less time and pay out smaller amounts. These simpler policies don’t have the extra features like borrowing money from them. A common type of this insurance is for people over 50, which accepts everyone in that age group.

Joint life insurance

If you and your partner want to make sure that the other person and your kids are taken care of if one of you dies, joint life insurance might be a good choice.

This type of insurance covers both of you together. If one of you passes away, it pays out money. It’s a good way to know you’re both protected. But, it’s important to know that most joint life insurance policies only pay once. So, after one person dies and the policy pays out, the other person won’t have coverage anymore. They’d need to get their own separate insurance then.

Joint life insurance means you both are insured under one policy, and you make one payment each month. But, it only pays out once during the policy’s term. If you each have your own policy, you’re both covered separately, but it means paying two premiums every month.

Critical illness coverage

Critical illness cover is insurance that gives you a big amount of money if you get really sick. It’s there to help you pay for things when you’re too sick to work. This can include medical costs or changes you need to make to your house.

How much money you get depends on your policy. It could be a part of your total insurance amount or a set amount of money. Each insurance company has different rules for this. Usually, you have to choose this cover when you first get your policy, not later on.

It’s really important to know which serious illnesses your policy covers and for how long it protects you.

Terminal illness coverage

Terminal illness cover is a type of insurance that gives your family a big amount of money if doctors say you have an illness and have only up to twelve months to live.

When you and your family are going through such a tough time, this cover can really help by taking away some money worries.

Children’s cover

Children’s cover is insurance that pays a one-time big amount of money if your insured child gets very sick. This money can help with things like medical bills or changes you might need to make to your house because of your child’s illness.

The amount you get could be part of your total insurance or a set amount, and this varies with each insurance company. Usually, you need to choose this cover when you first get your insurance, not later on.

It’s important to know exactly what illnesses are covered for your child and how long the cover lasts.

What is life insurance?

Life insurance is a plan that pays out a big sum of money if you, the person with the insurance, die during the time the policy covers. It can also pay out if you get really sick and aren’t expected to live more than a year. The idea is to give your family some money to help them out after you’re gone, like with paying off a house or keeping up their lifestyle.

There are two main types of this insurance: level cover and decreasing cover.

The one you pick changes how the amount of cover and its cost might change over time. They’re made for different money needs. For example, if you want to make sure your mortgage gets paid if you die during the policy, you might choose decreasing cover. This means the value of the insurance goes down over time, but what you pay each time stays the same. This matches how a mortgage usually decreases over time too. That’s why it’s sometimes called mortgage protection insurance.

Just remember, this insurance doesn’t build up any cash value. If you stop paying, your cover stops too. The policy pays out just once and then it’s done.

How much does life insurance cost?

How much you pay for life insurance can change based on a few things:

• Age: Usually, the older you are, the more you pay because there’s a higher chance of health problems.
• Lifestyle: If you don’t live healthily, like drinking a lot or being overweight, it can make your insurance cost more.
• Health: Already having health issues can make your insurance more expensive, especially if it’s a serious, ongoing problem.
• Family Health History: If your family has had serious health issues, it might affect your cost, because you might have a higher chance of getting those issues too.
• Job: Risky jobs can make your insurance cost more compared to safer jobs.
• Smoking: If you smoke or use nicotine products like vapes, you’ll pay more because of the health risks.
• How Long You’re Covered: Longer insurance plans usually cost more than shorter ones.
• How Much Cover You Want: The more coverage you want, the higher your payments will be.

It’s really important to answer the insurance company’s questions truthfully when you apply. If you don’t, it could cause big problems for your family later, like the insurance not paying out when it needs to.

What does my life insurance cover?

It’s mainly there to give your family money to help them out if you die. But, it doesn’t usually cover you if you get really sick and can’t work – for that, you might need something called critical illness cover. What’s exactly covered can be different depending on which insurance company you’re with, so it’s good to read your policy carefully.

And yes, even if something unexpected like a bungee jumping accident happens, the insurance will still pay your family. But remember, it’s all about keeping them financially secure, even if they might be upset about the risky stuff you did!

Can I choose who the money goes to when I pass away?

Mostly, yes, but you need to set things up right.

• Joint Life Insurance: If you have a policy with someone else, like your partner, they usually get the money if you die. But, if you break up, you might be able to change it into two separate policies.
• Single Life Insurance: If it’s just your policy, the money goes into your stuff (called your ‘estate’). If you want a specific person to get the money (a ‘beneficiary’), you might want to put your policy in a Trust. Here’s why:
  • Avoids Tax: Putting it in a Trust means it’s not part of your estate for tax when you die, so no Inheritance Tax on the money given to your family or friends.
  • Faster Payout: If you have other people (trustees) managing the Trust, they can get the money to your family or friends faster.
  • Making a Will: You can also say who gets the money in your will, but it might not be as good for taxes as a Trust.

It’s smart to get legal and money advice if you’re thinking about a Trust or making a will for your life insurance.

Do I need life insurance?

It really depends on your situation.

Ask yourself if you have people like a partner or kids who rely on you for money. If you do, life insurance can be a good way to make sure they have some money to help them out if something happens to you.

The money from life insurance can be used for big things like paying off a house or everyday expenses like bills and taking care of kids.

If you haven’t planned anything for your family for when you’re not there, life insurance might be something you should think about.

How long do you need life cover for?

Cover until you die

• Whole of Life Insurance: Pays out no matter how old you are when you die.
• Term Life Insurance: Only pays if you die during the policy’s term, which can be 1 to 40 years.

Cover while you have a mortgage

• Decreasing Term Life Insurance: The payout gets smaller over time, matching your mortgage repayments.
• Fixed Term Life Policy: The payout stays the same throughout the term, letting you pay off the mortgage and give the rest to your family.

Cover when you are older

• Life insurance gets pricier as you age, so it’s good to look around early.

• If Over 50 and Healthy: Term or whole life policies are options, but they get more expensive the longer you wait.
• If Over 50 with Health Issues: You might get term or whole life insurance, but there’ll be fewer choices and higher costs.
• Over 50s Life Insurance: Accepts everyone, no matter their health, and offers a fixed payout. But, you might pay more in than what gets paid out if you live a long time.

What kind of payout do you want?

There are two ways your family can get money from life insurance, depending on what kind of policy you choose:

• A Lump Sum: This is a big amount of money all at once. It can be used to pay off your house or give your family a bunch of money to use.
• An Income: This is smaller, regular payments that can help your family with their monthly costs like house payments or rent. But remember, these payments usually stop when the policy ends.

For a whole of life or an over 50s life insurance policy, you usually get a lump sum. But with a term life insurance policy, you might have both options to choose from.

Which payout is right for me?

How much money your family gets from life insurance depends on when you pass away:

• If You Die Just Before the Policy Ends: With an income payout, your family gets monthly payments only for the few months left. But with a lump sum, they get all the money at once, no matter how close to the end you are.
• If You Die Early in the Policy: With an income payout, your family gets monthly payments for the remaining years, which helps over time. But if it’s a lump sum, they get all the money right away, which might be more than what you paid in premiums.

Life policy pros and cons

Pros of term life insurance

• Can match up with your mortgage.
• Your payments stay the same during the policy.
• More options for how you get paid.

Cons of term life insurance

• Only pays if you die during the policy’s term.
• If you have a policy where cover decreases, the payout gets smaller over time.
• Inflation can make the payout worth less over time.
• Doesn’t cover every reason for death.

Pros of whole life insurance

• Pays out no matter when you die.
• No age limit for making a claim.

Cons of whole of life insurance

• Doesn’t cover every reason for death.
• Sometimes you pay more than what gets paid out.

Pros of over 50s life insurance

• Everyone over 50 gets accepted.
• You can pay small premiums.

Cons of over 50s life insurance

• Sometimes you pay more than what gets paid out.
• If you miss payments, you lose any money you’ve paid in.
• Only for people 50 and older.

How does life insurance work?

Life insurance works by giving your family money after you pass away. They can get this money all at once or in smaller amounts over time. This helps them with money stuff when you’re not there anymore.

How much money they get depends on what kind of plan you pick and how much coverage it has.

You can choose how the money is given to your family. It can help pay for things like your house or rent, or you can leave it as money for them to have later on.

What types of life insurance are there?

There are two main kinds of life insurance:

Term life insurance policies

These last for a set time, like 5, 10, or 25 years. They only pay out if you die during this time.

The types of term policies are:

• Level: Pays a fixed amount if you die within the term. The payout doesn’t change. It’s straightforward and usually the cheapest.
• Decreasing: The payout gets smaller each year. It’s good for paying off things like a mortgage that decrease over time.
• Increasing: The payout grows over time to match rising costs of living (inflation).

Whole of life insurance policies

These pay out whenever you die, as long as you keep paying the premiums.

• Often used for funeral costs or Inheritance Tax planning.
• They cost more than term policies. If you live a really long time, you might pay more into the policy than what will be paid out.

Over 50s life cover

Over 50s life cover policies will definitely pay money to your family when you die. But, they might not always be the best deal because sometimes you pay more into the policy than what your family will get out of it.

Also, the Financial Conduct Authority has said that some ads for over 50s plans can be confusing. They make people think they’re getting a policy that will fully pay for their funeral, but that might not be true.

Single or joint policy life insurance?

You can pick either a single policy just for you, or a joint one that covers both you and someone else, like your partner.

• Joint Life Insurance: If one person dies, the other person (like your spouse) gets the money, unless you’ve set up something different.
• Single Life Insurance: If you die, the money becomes part of your stuff (your ‘estate’) and you decide who gets it.

A joint policy usually costs less than having two separate ones for each person. But, remember, it only pays out once after the first person dies. If you have two separate policies, there will be money paid out when each person dies.

Do you need life insurance?

Life insurance gives money to your family when you die. It’s not for when you can’t work because of illness or disability. It’s a good idea to have it if you:

• Have kids who depend on you.
• Have a partner who needs your income.
• Pay a mortgage for a house where your family lives. The insurance can help them if you’re gone.
• Want to make sure there’s money for your funeral.

You might not need it if:

• You’re single and no one depends on your income.
• Your partner makes enough money for your family.
• You don’t make much money and could get government benefits.

Check if your job already gives you something like this. Some jobs have ‘death in service’ benefits tied to your salary. If it’s enough, you might not need another policy. But if you leave that job, you lose that cover.

Also, think about if getting life insurance money could change any government benefits your family might get without it.

How much is life insurance?

The price of life insurance can change based on different things, but it’s usually seen as good for the money you spend. You can get a policy that gives your family good financial support starting at just a little bit each day.

What you pay each month depends on:

• How Old You Are
• Your Health
• How You Live (like if you exercise)
• If You Smoke
• Health Problems in Your Family
• How Long You Want the Policy For
• Your Job (risky jobs might cost more).

The cost also changes based on how much cover you get. To figure out how much you need, think about:

• Any Debts You Have
• Your House Payments or Rent
• How Many People Rely on Your Money
• Your Take-Home Pay or Other Money You Get

How do I buy life insurance?

The cost of life insurance can be different from one place to another, so it’s a good idea to look around and compare prices.

You can find life insurance quotes at:

• Banks
• Insurance Brokers: They can help you find the right policy.
• Comparison Websites: Great for seeing different options side by side.
• Insurance Companies: Some sell directly to you.
• Credit Card Companies
• Financial Advisers: They can give you advice on what to choose.
• Stores: Even some big supermarkets offer life insurance.
• Mortgage Providers: When you get a mortgage, they often offer life insurance too, but you might find a better deal somewhere else.

Checking out all these places can help you find the best price for your life insurance.

How to cancel life insurance

You can cancel your life insurance whenever you want, but keep these things in mind:

• Cost of New Cover: If you get a new policy later, it might cost more because insurance usually gets more expensive as you get older.
• Health Conditions: If you already have health issues, a new policy might not cover them.
• No Going Back: Once you cancel, you can’t restart the same policy.

Usually, there’s no fee to cancel. You just stop paying the premiums. But, you won’t get back any money you’ve already paid in.

What is critical illness insurance?

Critical illness cover is an insurance policy that provides a tax-free one-time payment if you’re diagnosed with or have surgery for a critical illness defined in the policy during its term, and you survive for at least 10 days.

This cover is specifically for the illnesses listed in the policy and doesn’t include others.

The purpose of this insurance is to offer financial support for you and your family during your illness, allowing you to concentrate on getting better without the stress of financial burdens like paying bills.

What’s the difference between critical illness cover and life insurance?

Critical illness cover provides financial support for you and your family if you are diagnosed with a specific medical condition.

It offers a one-time payment to help with treatment costs or to manage regular expenses.

This type of insurance typically doesn’t include a payout upon death; that’s the role of life insurance. Life insurance is designed to provide for your family after you’re gone, like taking care of mortgage payments or funding children’s education, and it pays out if you die within the policy’s term.

Many insurance providers offer both critical illness cover and life insurance together. It’s important to understand the distinct benefits of each policy before making a decision.

Keep in mind that both life insurance and critical illness cover provide a payout only once upon a valid claim and then conclude. They do not accumulate cash value over time. Also, your coverage ceases if you stop making premium payments.

What is a terminal illness benefit?

Some insurance providers include a terminal illness benefit with their life insurance policies.

This feature allows you to receive your life insurance payout early if you are diagnosed with a terminal illness that matches the policy’s criteria and are expected to live less than 12 months.

Some include this benefit in their life insurance coverage, but not all insurance companies do. Therefore, it’s crucial to carefully review the terms and conditions of any policy you consider with another provider to ensure it meets your needs.

How does critical illness cover work?

The extent of your coverage will depend on how long you want your policy to last and how much you’re willing to pay each month. Ideally, you should have coverage for as long as you have significant financial responsibilities, like an ongoing mortgage or children’s education costs.

Then, you’ll need to decide between level cover and decreasing cover.

• Level cover involves selecting a lump sum that fits your needs and deciding the duration of your coverage. Your monthly payment remains consistent throughout the policy term. This option is suitable if you want to ensure general expenses, any extra costs due to health issues, and other financial obligations are met.

You can also opt for your cover amount to increase with inflation. While this choice might lead to higher monthly payments over time, it ensures the lump sum retains its value in the face of rising living costs.

• Decreasing cover, on the other hand, means the value of your cover reduces each month, but your monthly payment remains unchanged for the policy’s duration. This is a good fit if you aim to cover decreasing debts or loans, like a repayment mortgage, where the owed amount reduces over time.

Who needs critical illness cover?

Critical illness cover is an important decision, especially in situations where:

• Your salary is crucial for supporting yourself and your family.
• You lack sufficient savings to sustain you in case of a serious illness or disability.
• Your employment benefits don’t provide long-term support for extended sickness absences.

How much cover do you need?

Think about the expenses you’d need to manage if you became ill and couldn’t work, such as everyday costs like utility bills and groceries.

If you have a family, level cover can provide the necessary financial security to support them in case you’re unable to work due to health issues. It’s also a way to ensure your family’s needs are met.

Alternatively, you might need a policy to cover your mortgage, often a requirement for mortgage applications. Decreasing cover is good for this purpose as it aligns with the diminishing debt of a repayment mortgage.

For comprehensive protection, it’s common to combine critical illness cover with life insurance. This approach covers a range of scenarios, allowing you to tailor the coverage amount for each policy according to your needs.

Which illnesses are covered?

When considering critical illness insurance, it’s important to remember that these policies do not cover every type of illness.

Typically, they include a range of specified conditions, such as major diseases and health events like heart attacks, strokes, Alzheimer’s disease, and certain forms of cancer, as outlined by standard industry guidelines.

Many policies also extend coverage to children, often at no extra cost, providing additional peace of mind for families. For those seeking broader protection, there are options to include coverage for a wider array of conditions.

It’s always advisable to review the specifics of any policy carefully to understand exactly which conditions are covered. This information is usually detailed in the policy documentation or summary provided by the insurer.

Can you get cover after being diagnosed?

When applying for critical illness cover, most insurance companies will ask about your medical history.

Be sure to tell your insurer about any pre-existing conditions you have at the time of applying for the policy.

Having a pre-existing condition doesn’t automatically disqualify you from getting coverage. However, certain conditions that increase the likelihood of future illnesses might lead the insurer to decide against providing critical illness cover.

What does critical illness cover offer?

Critical Illness Cover is intended to shield you and your family from the financial strain that can come with a critical illness.

This type of policy offers a cash payout if you are diagnosed with or undergo a procedure for any of the specific critical illnesses covered, provided you survive for 14 days post-diagnosis.

The payment can be used for various expenses, such as household bills, childcare, or to help sustain a comfortable living standard if you need to take time off for recovery.

What are the benefits of critical illness cover?

Helps with Important Bills

If a critical illness stops you from working, the money you get can help pay for your mortgage, rent, or medical bills. It’s also useful for making life more manageable after your illness, like making changes to your home.

Tax-Free Money

The money you receive from your claim isn’t taxed. This means you can use it however you need to, without worrying about extra costs.

Covers Many Illnesses

This insurance covers a wide range of illnesses, including several types of cancer, heart attacks, and strokes, giving you broad protection.

Includes Cover for Kids

The policy also covers your children at no extra cost. If your child gets sick with a covered illness, you could receive a payout to help with their care.

What are the downsides of critical illness cover?

No Return if You Don’t Claim

The policy doesn’t have any cash value unless you make a valid claim. This means if you don’t claim during the policy term, you won’t receive any money back.

Doesn’t Cover Death

This cover is specifically for certain critical illnesses. If a successful claim is made, the critical illness policy ends, but this doesn’t affect any separate life insurance you might have.

Not All Illnesses Are Covered

While the cover includes many critical illnesses, there are some that aren’t covered. For instance, not all cancer types are included, deafness is covered only if it’s permanent, and kidney failure is covered only if it requires ongoing dialysis.

To claim, you need to meet the specific criteria set out in the policy.

Cost Varies by Individual

Just like life insurance, the cost of Critical Illness Cover is usually lower for younger people or those in good health. It’s important to choose a policy that suits your needs and budget, and understand that the cover might not be the best option for everyone.

Do I need critical illness cover?

Critical illnesses can strike unexpectedly, impacting anyone regardless of age and significantly disrupting lives.

If you find yourself unable to work due to a critical illness, having a plan to handle the financial strain can be invaluable.

While some might have savings to fall back on or employee benefits to rely upon, others may discover that Critical Illness Cover, with its provision of a lump sum, is a good choice for their financial safety net.

How much critical illness cover do I need?

When thinking about how much critical illness cover you need, look at your situation, how much you can easily pay each month, and whether you want a one-time cash payment or ongoing monthly benefits.

It’s hard to guess when you might get critically ill, so knowing how much cover you need can be tough.

A good way to start is to think about how much money you and your family would need if you couldn’t work because of a critical illness. Would you need to pay for your house, bills, or childcare? If things change later, you can always look at your cover again and change it.

How much does critical illness cover cost?

The cost of your premium can differ greatly, so the best way to know what you might pay is to get a quote.

Here are some things that will affect how much you pay:

• If you smoke or have smoked in the last year.
• How old you are.
• How much cover you need and for how long.
• Your health and way of life, like your weight and your family’s health history.
• Your job – some jobs are considered riskier and might cost more to insure.

What’s the difference between life insurance and critical illness cover?

The main difference between life insurance and critical illness cover is that life insurance provides financial support after your death within the policy term, while critical illness cover helps lessen the financial burden on you and your family if you’re diagnosed with a critical illness.

You can often add critical illness cover to a life insurance policy for an extra fee, but typically it can’t be added later on.

Here are some other key differences:

• Who Controls the Funds: Life insurance usually pays out to your beneficiaries, who then decide how to use the money. With Critical Illness Cover, the payout goes directly to you, allowing you to decide how to spend it.
• Children’s Coverage: Critical Illness Cover often includes protection for your children if they become critically ill, a feature usually not available with standard life insurance policies. Terms and conditions apply.

Remember, these policies are not for saving or investing; they only have value if you make a valid claim.

What is a critical illness?

A critical illness is a really serious sickness or health condition that can change your life. It might make it hard for you to work and pay your bills. These kinds of illnesses can happen to anyone, anytime – they’re very unpredictable.

What does critical illness insurance cover?

In critical illness insurance, the illnesses covered are those specified in the policy. Commonly, these include certain types of cancer, heart attacks, and strokes. However, policies can vary, covering many different conditions or just a few.

It’s important to check exactly which conditions a policy covers before you commit to it. For example, one policy might cover 52 different conditions. Remember, coverage usually applies only if you survive for at least 10 days following your diagnosis or surgery.

Critical illness cover is different from life insurance; it’s not about leaving money when you pass away. If you die, the critical illness policy ends without a payout.

What is a cover amount?

The cover amount is the sum you select at the time of purchasing your policy. Upon a valid claim, this is the amount the insurer will pay out as a tax-free one-time sum, which you can use in any way you need.

Though the policy usually ends after paying out the full lump sum once, some policies also cover less severe conditions and include children’s cover without extra charges. In these cases, the payout for these additional coverages isn’t the total amount, but the policy can remain active as long as you continue paying the premiums.

How to work out how much critical illness cover you need

Figuring out how much critical illness cover you need involves thinking about the expenses you’d need to cover if you couldn’t work due to a serious health condition. Consider costs like:

• Your mortgage or rent payments.
• Any ongoing loans.
• Childcare or other expenses for people who depend on you.
• Regular bills such as utilities, council tax, and car insurance.
• Medical costs for things like making your home more accessible or travel to the hospital, and possibly private healthcare.
• Day-to-day living expenses, including groceries and fuel.

Once you’ve listed these, think about:

• Any savings or assets you have that you could use.
• Whether you would qualify for any government benefits like Employment and Support Allowance.
• If you have an employee benefits package that includes sick leave for a long period.

This should give you a rough idea of the payout amount you would need, which you can then use for getting a quote. If you’re unsure, it might be helpful to talk to a financial advisor. Remember, the amount of cover you choose should fit your and your family’s financial needs.

How much can you expect to pay?

The cost of critical illness cover depends on your individual circumstances, so it’s key to choose a policy and cover amount that fits your specific needs. What’s right for someone else might not be right for you.

The price of your cover can be influenced by several factors, including:

Your policy

• The length of time you want your policy (the policy term)
• the type of policy you choose
• Whether your cover is level, decreasing, or inflation-protected
• Whether the policy is just for you or if it includes a partner

Your Personal Details

• Generally, the older you are when you start the policy, the higher the premium
• Riskier occupations may lead to higher premiums
• Factors like smoking and your family’s medical history can affect the cost

Remember, maintaining your cover depends on keeping up with your premium payments. If you stop paying, your cover will also stop.

How to choose between decreasing and level cover

Decreasing Cover

Choose decreasing cover if your main goal is to pay off a repayment mortgage or a long-term loan in case of a critical illness.

This type of cover is named ‘decreasing’ because the amount of cover reduces over time, just like the remaining balance on your mortgage or loan, making it less expensive than level cover. Your premiums are fixed, and you pay them monthly for a set period.

Level Cover

Level cover is suitable if you need a lump sum for other expenses like ongoing rent or mortgage payments, childcare, regular bills, or unforeseen costs related to a critical illness. With this option, both the cover amount and your monthly payments stay the same throughout the policy duration. This means the premiums are higher compared to decreasing cover, as the payout amount doesn’t reduce over time.

You also have the option to adjust your cover to account for inflation, ensuring the value of your lump sum keeps up with the cost of living. Although this can lead to higher monthly payments, it protects the payout from losing value over time.

Should life insurance and critical illness cover amounts be different?

If you’re considering both life insurance and critical illness cover, it’s important to note that they serve different purposes and are often separate policies. This means you can choose different amounts of coverage for each.

Critical illness cover is there to support you financially during treatment and recovery from a serious illness. This could be for a short period or longer. On the other hand, life insurance is designed to provide for your loved ones after your death.

As the two types of cover address different needs, the amount of critical illness cover you need might not be the same as your life insurance. When getting a quote, try different cover amounts to see which premiums are manageable for you. Just ensure that the chosen amount meets your realistic needs.

If you’re uncertain about the right amount of cover, talking to a financial adviser can be very helpful.

What is critical illness insurance for mortgages?

Critical Illness Insurance for Mortgages is a special kind of insurance designed to help cover your mortgage payments if you get diagnosed with a serious health condition, like certain cancers, heart attacks, or strokes.

If you become critically ill, this insurance pays out a lump sum that you can use to pay your mortgage, ensuring that your home is secure even when your health might prevent you from working and earning your regular income.

This type of insurance is especially helpful for protecting your home and providing financial peace of mind during challenging health situations.

How critical illness insurance protects your mortgage

Critical Illness Insurance protects your mortgage by providing financial support in the event you’re diagnosed with a serious illness covered by the policy.

Here’s how it works:

• Payout on Diagnosis: If you’re diagnosed with one of the critical illnesses listed in your policy, the insurance pays out a tax-free lump sum.
• Mortgage Payments: This lump sum can be used to cover your mortgage payments. This is especially important if your illness affects your ability to work and earn an income.
• Financial Security: By ensuring that your mortgage payments can be made, this insurance helps maintain your living situation and prevents the risk of losing your home due to financial strain from unexpected health issues.
• Peace of Mind: Knowing your mortgage is covered in the event of a critical illness can provide significant peace of mind, allowing you to focus on your health and recovery without the added stress of financial worries.

Choosing the right coverage for your mortgage

When picking the right Critical Illness Insurance for your mortgage, here are some things to think about:

Understanding your mortgage and coverage needs

Choose insurance that matches what you still owe on your home. This ensures it can fully cover your mortgage if you fall ill. The insurance should last as long as you have mortgage payments to make. If you already have a good amount of savings or other income sources, you might not need as much insurance coverage.

Think about your personal and policy factors

Pick a monthly payment that fits your budget. More comprehensive coverage typically costs more. If your family’s health history or your own health puts you at a higher risk for critical illnesses, consider getting more extensive insurance.

Ensure the policy covers a variety of illnesses, especially ones you might be more likely to face. Also, if there are changes in your life, like a decrease in your mortgage amount, you might want a policy that can adjust accordingly.

Critical illness insurance vs mortgage protection insurance

Critical Illness Insurance and Mortgage Protection Insurance are both important, but they’re different.

Critical illness insurance

• Pays a lump sum if you’re diagnosed with a serious illness covered by the policy.
• The money can be used for anything: paying bills, everyday expenses, or your mortgage.

Mortgage protection insurance

• Specifically designed to pay off your mortgage if you pass away or are too ill to work.
• Ensures your mortgage is covered, relieving your family from worrying about house payments under difficult circumstances.

So, the main difference is what they cover. Critical Illness Insurance helps with many expenses during serious illness, while Mortgage Protection Insurance is focused just on your mortgage if you pass away or can’t work.

How much cover do I need for critical illness cover for mortgages?

When figuring out how much critical illness cover you need for your mortgage, consider the following points:

1. Mortgage Balance: The amount of coverage should at least match your remaining mortgage balance. This ensures that if you get critically ill, the insurance can cover your entire mortgage.
2. Other Financial Responsibilities: Think about other expenses you might have, like bills, childcare, or living costs. You might want enough cover to help with these too, not just the mortgage.
3. Your Budget: Look at what you can afford to pay in premiums. More coverage usually means higher premiums.
4. Income Replacement: If your salary is key to paying your mortgage, consider how much income you’d need to replace if you couldn’t work.
5. Health Factors: Your health condition and family medical history might affect your need for coverage. If you’re at higher risk for certain illnesses, you may want more coverage.

How to apply for mortgage critical illness insurance

Start by finding out the potential costs either online or through an insurance agent.

Filling out the application

Provide personal details like age, job, health status, and whether you smoke.

Answering health-related questions

Be prepared to share information about your health and medical history, which helps the insurer assess your application.

Deciding on your coverage amount

Choose an amount that sufficiently covers your mortgage and meets your financial needs.

Selecting policy details

Decide on the length of your policy and whether you want level or decreasing coverage.

Reviewing and submitting your application

Make sure all the information is correct before submitting your application.

Undergoing the underwriting process

The insurance company will review your application, possibly requesting additional information or medical tests.

Receiving policy approval

Once reviewed, the insurer will inform you if your application is approved and provide the details of your premiums.

These steps will guide you through the process of applying for Mortgage Critical Illness Insurance, ensuring you get the right coverage for your needs.

What is the cost of critical illness insurance for mortgage payments?

The cost of Critical Illness Insurance for mortgage payments varies based on several factors:

1. Amount of Cover: The more coverage you need (to match your mortgage amount), the higher the premium.
2. Policy Term: Longer policies generally cost more.
3. Type of Policy: Level cover tends to be more expensive than decreasing cover because the payout amount doesn’t reduce over time.
4. Your Age: Premiums usually increase as you get older.
5. Health and Lifestyle: Your overall health, whether you smoke, and your family medical history can impact the cost.
6. Job Risks: If your job is considered high-risk, this might also affect the premium.

Remember, each person’s situation is different, so premiums can vary widely. Getting a personalised quote will give you the most accurate idea of what you’ll pay for your specific circumstances.

What’s covered in mortgage critical illness policies?

Mortgage Critical Illness Policies typically cover a range of serious health conditions and events, which can vary between policies.

Commonly included are certain types of cancer, heart attacks, and strokes. However, the specific illnesses covered can be broader, extending to conditions like multiple sclerosis, kidney failure, or paralysis.

The key is that these illnesses are severe enough to impact your ability to work and pay your mortgage.

Some policies also cover surgeries such as organ transplants or bypasses. It’s important to read the policy details carefully, as each insurer may have different definitions and exclusions for what illnesses and conditions are covered under their critical illness policies.

What is income protection insurance?

Income protection insurance is a type of policy that helps you financially if you can’t work because of illness or injury.

It pays you a regular income, usually a percentage of your salary, if you’re unable to do your job for a significant period.

This insurance is designed to ease the financial burden during times when your health affects your ability to earn an income, ensuring you can still cover your essential expenses like bills, mortgage, or rent.

What are the different types of income protection plans?

There are mainly two types of income protections plans:

• Short-Term Income Protection: These plans provide coverage for a limited time, typically from a few months up to one or two years. They’re designed to offer financial support in the short term if you’re temporarily unable to work.
• Long-Term Income Protection: These policies provide coverage for a longer period, potentially until you retire or are able to return to work. Long-term plans are suitable if you’re seeking protection against prolonged inability to work due to serious health issues.

Both types are designed to replace a portion of your income if illness or injury prevents you from working, but the duration of the coverage and the nature of the benefits can vary significantly between short-term and long-term plans.

Benefits of income protection insurance

Income protection insurance offers several benefits:

• Financial Security: It provides a regular income when you can’t work due to illness or injury, helping you manage your finances and maintain your standard of living.
• Coverage for Bills and Expenses: The payments from the policy can be used to cover essential expenses like mortgage, rent, utilities, and daily living costs.
• Peace of Mind: Knowing you have a safety net in case of health problems reduces stress and allows you to focus on recovery without financial worries.
• Tailored to Your Needs: Policies can often be customised in terms of coverage amount, duration, and waiting periods, fitting different needs and budgets.
• Tax-Free Payments: The income you receive from these policies is usually tax-free, ensuring you get a significant portion of your usual income.
• Support for Recovery: With financial concerns addressed, you can take the necessary time to recover properly without rushing back to work.

These benefits make income protection insurance a valuable tool for safeguarding your financial wellbeing in challenging times.

What does income protection cover?

Income protection insurance typically covers:

• Lost Income Due to Illness or Injury: It provides a replacement income if you are unable to work because of sickness or an accident.
• A Percentage of Your Regular Salary: The policy usually pays out a portion of your usual earnings, often between 50% to 70%.
• Recurring Monthly Expenses: This can include mortgage or rent payments, bills, and other day-to-day living costs.
• Long-Term Security: Depending on the policy, it can cover you for several years or even until retirement age, in case of long-term illness or injury.

The coverage ensures that you can maintain your lifestyle and meet your financial obligations even when you’re unable to earn an income due to health reasons.

What does income protection exclude?

Income protection typically excludes:

• Pre-existing Medical Conditions: Illnesses or injuries you already had before taking out the policy are often not covered.
• Voluntary Unemployment: If you choose to leave your job or are fired for misconduct, you won’t be covered.
• Certain Illnesses or Injuries: Depending on the policy, some specific conditions or injuries might be excluded.
• Drug or Alcohol Abuse: Health issues resulting from substance abuse are usually not covered.
• Criminal Activity or War: Injuries or illnesses due to involvement in criminal acts or war are typically excluded.

Each policy has its own specific exclusions, so it’s important to read the terms carefully to understand what’s not covered.

What are income protection premiums?

Income protection premiums are the regular payments you make to keep your income protection insurance active.

These premiums are calculated based on several factors, including your age, health, occupation, and the level of coverage you choose. The amount and frequency of these payments (monthly or annually, for example) are determined when you take out the policy and can vary from one insurer to another.

Essentially, these premiums are the cost of maintaining your insurance coverage, ensuring you have financial support in case you’re unable to work due to illness or injury.

How much does income protection cost?

The cost of income protection varies widely and depends on several factors:

• Your Age: Generally, the younger you are when you take out the policy, the lower the premiums.
• Health and Lifestyle: Your current health, medical history, and habits like smoking can affect the cost. Healthier individuals usually pay lower premiums.
• Occupation: Jobs with higher risks of injury or illness often lead to higher premiums.
• Coverage Level: The percentage of your salary you want to cover and the policy’s duration influence the cost. Higher coverage levels and longer terms typically increase the price.
• Waiting Period: The length of time before the policy pays out after you stop working (deferred period) also impacts the cost. Longer waiting periods can reduce the premium.
• Type of Policy: Whether the policy is inflation-linked, guaranteed, or reviewable can affect pricing.

The specific combination of these factors means that the cost of income protection can vary significantly from person to person.

How to claim income protection benefits

Claiming income protection benefits typically involves the following steps:

• Notify Your Insurer: As soon as you realise you’re unable to work due to illness or injury, contact your insurance provider to inform them of your situation.
• Complete a Claim Form: Your insurer will provide a claim form, which you need to fill out with details about your condition and how it affects your ability to work.
• Provide Medical Evidence: You’ll need to submit medical documentation from your doctor or specialist confirming your illness or injury and its impact on your work.
• Wait for the Assessment: The insurer will review your claim, which may include assessing your medical information and possibly requesting additional details.
• Adhere to Policy Terms: Ensure you comply with the terms of your policy, such as the deferred period, which is the waiting time before your benefit payments start.
• Receive Payments: Once your claim is approved, you will start receiving regular payments, as defined in your policy, to replace a portion of your income.

It’s important to understand your policy’s specific requirements and follow them closely to ensure a smooth claim process.